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Ruling

Subject: Residency

Question and answer:

Are you a resident of Australia for income tax purposes for the financial year ended 30 June 2012?

No.

This ruling applies for the following periods:

Year ended 30 June 2012

The scheme commences on:

1 July 2011

Relevant facts and circumstances

You were born in Country X and are a citizen of Country X.

You arrived in Australia in late 2011 and spent less than two months here.

You entered Australia with a temporary resident visa.

The purpose of your visit to Australia was to take up a prearranged short term employment contract.

You work for a company based in Country X that provides consultancy services to Australian businesses. The company also has an office in Australia.

You have worked in other countries for this employer.

While in Australia you stayed in a rented house.

You were renting accommodation in Country X prior to your visit to Australia.

Your assets in Australia consist of a bank account.

Your assets in Country X consist of a bank account.

You were not accompanied by any members of your family when you visited Australia.

Your social connections in Australia comprise of friends who work for the same employer.

You are not employed by the Australian Commonwealth government and you do not have a spouse that is employed by the Australian Commonwealth government.

Relevant legislative provisions

Income Tax Assessment Act 1936 - subsection 6(1)

Income Tax Assessment Act 1997 - section 6-5

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. 

The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are:

· the resides test

· the domicile test

· the 183 day test

· the superannuation test.

The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides. None of the other tests need be applied if the 'resides test' is satisfied.

The 'resides' test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 5^th edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; have one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'.

The Commissioner's view on the resides test is contained in Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia (TR 98/17).

An individual may be considered a resident under the resides test if their behaviour while they are here is such that they exhibit a degree of continuity, routine or habit that is consistent with a person residing in Australia according to the ordinary meaning of the word 'reside'. Factors that can be taken into account when ascertaining the character of a person's behaviour include the intention or purpose of the individual's stay in Australia, presence of family in Australia, location of assets and social and living arrangements.

As a broad principle, where a person has a settled routine for six months or more (for example, the person has stayed in one place or has been with one employer for six months at the same location) they may satisfy the resides test. However, the period of physical presence or length of time in Australia is not, by itself, decisive when determining whether an individual resides here.

Paragraph 50 of TR 98/17 states that individuals who enter Australia with the purpose of taking up prearranged employment opportunities may be residing here if their stay is consistent with living in Australia as described above. However, paragraph 26 of TR 98/17 states that a period of less than six months completing an employment contract would not normally be sufficient time to demonstrate behaviour that is consistent with residing in Australia.

In your case, you visited Australia to take up a pre arranged employment contract for a period of less than two months. Although the length of time you spent in Australia is not, by itself, decisive when determining whether you 'resided' here, it is considered that the period you spent here was significantly below the generally accepted six months presence in Australia as previously mentioned.

We consider that the period of time you spent in Australia was not long enough to exhibit a degree of continuity or routine that is consistent with a person residing here. Therefore, you were not residing in Australia according to ordinary concepts during your stay.

You are not a resident of Australia for income tax purposes under the resides test for the 2011-12 financial year.

The domicile test 

If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. The domicile of an individual is the place that is considered by law to be his or her permanent home and is attributed at birth.

In your case, you were born in Country X and are a citizen of Country X. Therefore, your domicile is not in Australia and you are not a resident of Australia for income tax purposes under the domicile test for the 2011-12 financial year.

The 183-day test

An individual will be considered to be a resident under this test if that person is in Australia for 183 days or more in the income tax year, unless the Commissioner is satisfied that the usual place of abode of the individual is outside of Australia and the individual does not intend to take up residence in Australia.

In your case, you are not a resident of Australia for income tax purposes under this test as you were not present in Australia for 183 days or more in the 2011-12 financial year.

The superannuation test 

An individual is considered to be an Australian resident for income tax purposes if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. 

In your case, you are not a resident of Australia for income tax purposes under this test as you are not eligible to contribute to the PSS or the CSS, and you are not a spouse or a child under 16 of a person who is eligible to contribute to the PSS or the CSS.

Your residency status

As you are not an Australian resident for income tax purposes under any of the tests of residency as outlined in subsection 6(1) of the ITAA 1936, you are not an Australian resident for taxation purposes for the 2011-12 income year.